General Electric is cut to AA+ by S&P

Standard & Poor’s Ratings Services today lowered its long-term ratings on General Electric Co. (GE) and units, including General Electric Capital Corp. (GECC), by one notch to ‘AA+’ from ‘AAA’. We affirmed the ‘A-1+’ short-term credit ratings. The outlook is stable.

The main factor in the downgrade was our assessment of the stand-alone credit profile of financial services unit GECC, which we now view as ‘A’, compared to the ‘A+’ we had indicated before.

“We believe that GECC is under increasing earnings pressure, due to the recent sharp deterioration in general economic conditions around the globe,” said Standard & Poor’s credit analyst Robert Schulz.

“This will result, in our opinion, in rising credit losses across key segments of GECC’s finance portfolio. Still, we believe that GE’s industrial-based cash generation capabilities remain fundamentally strong–even in the face of enormous global economic headwinds–and that it will generate growing cash balances from current levels over the next two years. We do not anticipate that GE will benefit from any meaningful earnings or cash flow from GECC through 2010.”

Let’s be honest, GE is a financial institution – a private equity firm, if you will. It was laughable that they were rated AAA even after they cut their dividend. All of this was well known. Read my takes on their dividend and their prospects.

Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty five years of business experience. He has also been a regular economic and financial commentator in print and on television for the past decade. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College.